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Decision No. 13,497

Appeal of ANDREW LEWIS, LOUIS WIESNER, and CHARLES DERWIN, from action of the Board of Education of the Johnstown City School District relating to an increase in the tax levy for the school district budget.

Decision No. 13,497

(October 23, 1995)

Ruberti, Girvin & Ferlazzo, P.C., attorneys for respondent, Jeffrey D. Honeywell, Esq., of counsel

MILLS, Commissioner.--Petitioners, members of the Board of Education of the Johnstown City School District, challenge the action taken by respondent board to increase the tax levy for the 1992-93 school year budget. Petitioner requests that I issue an order prohibiting respondent from spending $105,764, which is the amount in excess of that originally budgeted for the 1992-93 school year, or, in the alternative, that respondent be directed to credit that amount in the following year's budget. The appeal must be sustained in part.

On June 24, 1992 respondent adopted a budget calling for the expenditure of $16,763,152 in the 1992-93 school year. Subsequently, respondent's negotiations with the Teacher's Association resulted in an average salary increase in excess of the allocation for that purpose in the June budget. On August 19, the board amended the budget to account for this increase and authorized an increase in the tax levy for the 1992-93 school year in the amount necessary to obtain the additional funds. Petitioners commenced this appeal on or about September 18, 1992 contending that this action was beyond respondent's legal authority.

Petitioners contend that respondent, as a board of education of a small city school district, does not have the authority to increase taxes after the start of the fiscal year. Respondent contends that this appeal, commenced on September 18, 1992, is not timely to review its August 6, 1992 action. Respondent further contends that its decision to raise the appropriation, and consequently the tax levy, was within its authority and was accomplished in a procedurally correct manner.

The issue before me is whether or not the board of education of a small city school district has authority, after the adoption of a budget and following a public hearing on the budget, to increase the amount of the budget previously adopted, and more specifically, whether it has the authority to increase the tax levy for that fiscal year to accommodate an increase in the newly adopted budget. Since the increase in the tax levy did not occur until August 19, 1992, I find this appeal, commenced on September 18, 1992, timely.

I also find that the provisions of the Education Law relating to the process and authority for adopting a budget and levying a tax for that budget do not authorize a board of education in a small city school district to increase a tax levy after a final budget has been adopted and after the beginning of the fiscal year. The pertinent statutory provisions are contained in Article 51 of the Education Law, ''2517 through 2521. Section 2517 requires a board of education to conduct a public hearing on a tentative budget. Section 2518 authorizes the board, following the public hearing, to revise a tentative budget. Section 2519 requires that on or before the close of the current school year, in this case the 1991-92 fiscal year, the board of education must adopt the tentative budget, as revised, as the budget of the school district for the ensuing fiscal year. Section 2519(3) provides:

3. On and after the first day of each fiscal year, the several amounts stated in the budget for such fiscal year as estimated expenditures shall be and become appropriated in the amounts and for the purposes therein specified. The several amounts therein stated as estimated revenues and the amount necessary to be raised by tax on real estate in addition thereto, to finance the total estimated expenditures, shall be and become applicable in the amounts therein stated for the purpose of meeting said appropriations.

In my view, this means that the amount of the budget which has to be filed by the board of education before the end of the previous school year constitutes the authorization for the tax levy to finance the estimated expenditures for the succeeding fiscal year. Education Law '2521 provides that the board of education of a small city school district may make additional appropriations, or increase existing appropriations, during the fiscal year but further provides that the funds for that increase are to be provided from "the contingent fund, surplus revenues, or unencumbered balances and appropriations, or pursuant to the Local Finance Law." The reference to the Local Finance Law would authorize the board of education to issue budget notes which would require the payment of interest.

In responding to the need for increased funding for the 1992-93 school year, respondent did not employ the means authorized by '2521. It is also pertinent that Real Property Tax Law '1335, relating to the authority of boards of education to impose a supplemental tax levy, is made expressly inapplicable to ". . . a school district which is wholly or partly within a city . . . ." Therefore, a board of education of a small city school district does not have the authority to increase the tax levy to finance an increase in proposed expenditures after the budget has been adopted, and the tax levy established, commensurate with the beginning of the fiscal year.

Petitioners raise additional contentions relating to the sufficiency of the contingent fund available to provide revenue for the increased budgetary appropriations for salary purposes. They contend that sufficient unencumbered surplus funds were available to pay for the increases without the necessity of increasing the tax levy. In view of the fact that the fiscal year in question has now concluded, I find that a determination of these issues would be purely an academic exercise and would serve no purpose. I therefore decline to address them.

I do note, however, that a December 8, 1992 audit report presented to respondent states that the unreserved undesignated fund balance maintained by respondent exceeds that which is statutorily authorized, i.e., 2% of the budgeted appropriations (Real Property Tax Law '1318). Respondent is statutorily required to reduce the tax levy by any amount which exceeds the 2% limitation (Appeal of Markert and Bertrand, 31 Ed Dept Rep 481). The record before me does not contain any evidence to indicate that respondent's decision to increase the tax levy for the 1992-93 school year constituted an intentional violation of the law. In fact, there is no evidence that the question of whether a board of education could increase the tax levy in the manner challenged by petitioner had ever been subject to judicial review. Respondent and other small city school districts, however, should note that the pertinent statutes do not permit the board of education of a small city school district to increase the tax levy in the manner described in this appeal.

THE APPEAL IS SUSTAINED TO THE EXTENT INDICATED.

END OF FILE